The Impact of the Alternative Minimum Tax on Stock Market
Date Issued
2006
Date
2006
Author(s)
Wu, Chih-Ying
DOI
zh-TW
Abstract
To rationalize the nation’s taxation systems, the Ministry of Finance proposed a draft of the alternative minimum tax (AMT) in 2005. On December 9, 2005, the AMT proposal passed its third reading in the Legislature Yuan. This new tax system was predicted to have negative impacts on stock market.
This paper uses event study to examine the stock market reactions to the change of the AMT policy. Three event days are chosen: (1) August 30, 2005, the date the Executive Yuan announced the AMT rates； (2) November 23, 2005, the date the Legislative Yuan passed the first reading of the AMT； (3) December 9, 2005, the date the Legislative Yuan passed the third reading and approved the AMT. The results of this study are as follows:
(1) On August 30, 2005, when the Executive Yuan proposed a 10% corporate AMT rate, most companies had significant negative cumulative abnormal returns (CAR), especially the electronic industry. On November 23, 2005, when the Legislative Yuan passed the first reading, companies also experienced negative stock returns. On December 9, 2005, when the Legislative Yuan passed the third reading, this event no longer affected companies’ stock returns, except for the financial and insurance industry.
(2) The results of the regression analysis suggest that CAR was negatively related with AMT-to-market value ratio, and employee stock bonus ratio. The results also indicate that the electronic industry had significantly negative CAR when the Executive Yuan proposed a 10% corporate AMT rate. However, CAR was positively related with effective tax rate and foreign investment ratio.
Subjects
最低稅負制
所得基本稅額條例
事件研究
異常報酬
Alternative Minimum Tax (AMT)
Income Basic Tax
Event Study
Abnormal Return
Type
other
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